TECH TALK: Blue Ocean Strategy: The Book

There are two books I have read recently that Id like to share: Blue Ocean Strategy by W. Chan Kim and Renee Mauborgne and Fooled by Randomness by Nassim Taleb. I have talked about both before. I mentioned Blue Ocean Strategy in a recent Tech Talk on the Value of Vision, and I had mentioned Nassim Talebs thinking in a series on Black Swans almost two years ago. In this series, I want to discuss both in more depth. We will begin this week with Blue Ocean Strategy.

Here is what the Publishers Weekly has to say about Blue Ocean Strategy (via Amazon):

Kim and Mauborgne’s blue ocean metaphor elegantly summarizes their vision of the kind of expanding, competitor-free markets that innovative companies can navigate. Unlike “red oceans,” which are well explored and crowded with competitors, “blue oceans” represent “untapped market space” and the “opportunity for highly profitable growth.” The only reason more big companies don’t set sail for them, they suggest, is that “the dominant focus of strategy work over the past twenty-five years has been on competition-based red ocean strategies”-i.e., finding new ways to cut costs and grow revenue by taking away market share from the competition. With this groundbreaking book, Kim and Mauborgne-both professors at France’s INSEAD, the second largest business school in the world-aim to repair that bias. Using dozens of examples-from Southwest Airlines and the Cirque du Soleil to Curves and Starbucks-they present the tools and frameworks they’ve developed specifically for the task of analyzing blue oceans. They urge companies to “value innovation” that focuses on “utility, price, and cost positions,” to “create and capture new demand” and to “focus on the big picture, not the numbers.” And while their heavyweight analytical tools may be of real use only to serious strategy planners, their overall vision will inspire entrepreneurs of all stripes, and most of their ideas are presented in a direct, jargon-free manner. Theirs is not the typical business management book’s vague call to action; it is a precise, actionable plan for changing the way companies do business with one resounding piece of advice: swim for open waters.

A review in strategy+business gave the following example:

The key element of a blue ocean strategy is a value innovation: a combination of differentiation and low cost that sets a product line or service apart from its competitors. Consider, for example, the story of Yellow Tail, a wine created explicitly for the U.S. market and launched in 2000 by Casella Wines, a small, family-owned Australian winery. Casella challenged the wine industrys givens: that wine is a unique beverage for the informed consumer who requires a complex, wide range of products and is best reached through marketing and brand building that drips with enological terminology.

Casella created a blue ocean by introducing a fun, nontraditional wine targeted at the U.S. drinker who does not normally drink wine a market three times the size of the U.S. wine market. Soft, sweet, and fruity, Yellow Tail appealed to beer drinkers and ready-to-drink cocktail drinkers, without the traditional focus on tannins, oak, complexity, and aging. Casella made selection easy by offering only one white and one red wine and by replacing the technical jargon with a striking kangaroo logo.

The result: Yellow Tail became the fastest-growing brand in the history of both the U.S. and the Australian wine markets and the No. 1 big-bottle (750ml) red wine in the U.S. by August 2003 and Casella Winery grew to be one of the largest wineries in Australia.

Tomorrow: Cirque du Soleils Reinvention

TECH TALK Blue Ocean Strategy+T

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Rajesh Jain

An Entrepreneur based in Mumbai, India.